The Federal Reserve uses money that doesn't really exist to purchase Treasury Securities from the US Government.

The Federal Reserve has purchased approximately $2.3 trillion of US Treasury securities in the last few years using an approach known as "quantitative easing," or QE, which lowers medium and long term interest rates and spurs economic growth (the Fed can lower short term rates by unilaterally lowering the discount rate, the rate they loan money to banks for short periods). The more buyers that exist in the Treasury securities market, the higher the price of the Treasury securities, which lowers the yields (effective interest rates) that must be paid by the government. This in turn lowers all medium and long term interest rates for other loans such as mortgages, car loans, business loans, etc. So the Fed's intervention into the Treasury market is designed to lower interest rates and spur economic growth.

In order to pay for these securities, the Federal Reserve simply wire transfers the money (which doesn't really exist) by electronically crediting the accounts of banks and investors with new money for the purchase of their bonds under the quantitative easing programs. This is not exactly the same as printing money, but pretty close, since the money does not exist before is wire transferred to the Treasury bond sellers. Obviously, only the Fed has the right to do this.

The theory is that at some later date, when the economy recovers, the Fed can sell its Treasury securities that it bought with wire transfers alone (not real money), taking the money they created out of thin air and subsequently removing it from the money supply. This will cause interest rates to rise, so they can't do that until the economy recovers, or it would just sabotage what they originally did trying to reduce medium and long term interest rates.

Ironically, the Fed is reportedly considering actually printing the money it uses for quantitative easing, instead of just electronically crediting accounts using money that does not actually exist. Then they would borrow the printed money back for short periods to take it out of the money supply. There would be no real assets behind the money that is printed for this purpose, other than the Treasury securities they buy with that money, but it doesn't actually exist beforehand. This is called 'sterilized' bond-buying, and obviously a bit complex for most of us to understand, and the Fed has not yet committed to this new method that would involve actual printing of money.

The Federal Reserve is independent from the Federal Government, although the President appoints Fed members with consent of the Senate. Although independent from the US Government, it obviously has special powers that no private institution has. The Fed has the twin objectives of maximizing employment and keeping inflation low (which usually requires some trade-offs), and using monetary policy as discussed above (and others methods) to accomplish these objectives.

No one should conclude that I have any personal opinion of the Fed's actions (or contemplated actions) one way or the other, by me posting the above information. If I have made any errors in explaining this, I welcome comments.

You've got some details confused and you're missing some context, as usual. Other than that, your teacher was right obviously. He's apparently got a bit of an unconventional way of putting it which is arguably misleading though. But that's a detail again...So, corrections:a) QE is a technical workaround, not a fundamentally new policy. It does however signals that a workaround was needed (in other words, all is not well). So it gets noticed for good reason as well as for no better reason that people get worked up about novelties. Decreeing arbitrary amounts of money into existence has implicitely been part of the Fed's mandate whenever the US wasn't on the gold standard and the Fed has carried out that mission whenever they figured it was the right policy.b) The Fed also buys private securities, not only US debt. This is the innovation you should be looking at, not QE.c) "real" money and the printing dollar bills is almost irrelevant and has nothing to do with the "sterilized" thing. The phrase "printing money" is normally not used litterally.d) The Fed is only independent in the sense than the judiciary is independent. It's for all practical purposes part of the governement.

You've got some details confused and you're missing some context, as usual. Other than that, your teacher was right obviously. He's apparently got a bit of an unconventional way of putting it which is arguably misleading though. But that's a detail again...So, corrections:a) QE is a technical workaround, not a fundamentally new policy. It does however signals that a workaround was needed (in other words, all is not well). So it gets noticed for good reason as well as for no better reason that people get worked up about novelties. Decreeing arbitrary amounts of money into existence has implicitely been part of the Fed's mandate whenever the US wasn't on the gold standard and the Fed has carried out that mission whenever they figured it was the right policy.b) The Fed also buys private securities, not only US debt. This is the innovation you should be looking at, not QE.c) "real" money and the printing dollar bills is almost irrelevant and has nothing to do with the "sterilized" thing. The phrase "printing money" is normally not used litterally.d) The Fed is only independent in the sense than the judiciary is independent. It's for all practical purposes part of the governement.

a) Nowhere did I say QE was a new policy.

b) I didn't say that QE was an innovation (nor did the articles that I got the info say it was an innovation). I am not sure what the significance of buying private or public debt is, since the main point being made is that the "money" used to buy them doesn't really exist beforehand in the traditional sense, so it is basically the same as printing money (even if no money is printed and only electronic funds are used). The purpose of buying debt is to drive down interest rates, and both public and private debt instruments compete in the same marketplace.

c) I am not an expert, but I believe there is some connection to the proposed "sterilized" policy, and them actually printing money or why would they consider changing the way they do it now (which is just to wire transfer funds electronically to sellers from Fed accounts that don't actually have the money to the sellers of the debt)? It apparently (according to the articles which I provided links for) has something to do with them borrowing the printed money back that they used to buy the securities. When I originally used the phrase "printing press" when quoting the Professor of Taxation, I got a lot arguments about that from other posters, but I basically agree that there is not much difference whether they print money or just wire it, since it doesn't really exist beforehand either way. This is especially true when the Treasury prints bonds and sells them to the Fed (indirectly) with money that does not actually exist beforehand.

d) That is a matter of semantics. Neither the President nor the Congress can fire a member of the judiciary or the Fed. Unlike the judiciary, I am pretty sure that Fed employees are not federal employees and I don't believe Fed employees or members can be impeached (as can members of the judiciary). But obviously, since Fed members are appointed by the president and come up for re-appointment, they are not completely independent. But no one is completely independent in the banking system, since private banks need government approval to operate and can be forced to take bailout money even when they don't want it.

I misread the way you introduced the topic. As long was we agree it's not the only way to "print money" and therefore that "printing money" is not a new policy...

m0002a wrote:

I believe there is some connection to the proposed "sterilized" policy, and them actually printing money or why would they consider changing the way they do it now

The "sterilized" thing is a way to ease which is more targetted. The connection is that it can't be construed as "printing money" (which means using monetary policy to finance the deficit). So I suppose they can use that point as PR. But it ends up affecting the deficit anyway and I think the real reason you'd do that instead or in adddition to straight QE is if you wanted to flatten the yield curve.In any case, it's got nothing to do with actual printing, wire transfers or anything like that.

m0002a wrote:

But obviously, since Fed members are appointed by the president and come up for re-appointment, they are not completely independent. But no one is completely independent in the banking system ...

The other banks don't operate on behalf of the state and don't give their profits to the Treasury. It's kind of a big deal.

You've got some details confused and you're missing some context, as usual. Other than that, your teacher was right obviously. He's apparently got a bit of an unconventional way of putting it which is arguably misleading though. But that's a detail again...

I don't care to reveal any personal details, but it was a major research institution in the US, considered to be one of the top 25 universities in the US, and ranked even higher than that in Accounting/Business.

The professor is not teaching any longer and is not listed there. This was more than 25 years ago.

I don't know why it so controversial an idea that tax policy is very heavily influenced by the government giving people incentives to do things they want us to do (via deductions, tax credits, and sometimes other means in the tax code), which individuals might not ordinarily do on their own, as opposed to those deductions which are legitimate expenses related to offsetting income. Probably the professor exaggerated a bit for shock value, but it does point out that:

1. very large portions of the tax code are incentives or penalties not related to calculating true "economic" net income, and2. the Federal government does not need to pay particularly close attention to whether the budget is balanced on a year to year basis, and often not even long term (unlike states which cannot print money)

I don't care to reveal any personal details, but it was a major research institution in the US, considered to be one of the top 25 universities in the US, and ranked even higher than that in Accounting/Business.

I'm not asking for your name or identity... just the professor's name.

2. the Federal government does not need to pay particularly close attention to whether the budget is balanced on a year to year basis, and often not even long term (unlike states which cannot print money)

Sure, the Feds have great leeway in the short run but this overstates the case a bit.a) the Feds have extra leeway because the dollar a global currency (something which shouldn't be taken for granted), not only because they can printb) states which can't print can have a perpetual deficit as long as it's smallc) a deficit that's too large for too long is trouble, even for the Fedsa) it also depends on the economic situation (oversimplifying: if the economy is is good shape, you don't want a large deficit increase)

Sure, the Feds have great leeway in the short run but this overstates the case a bit.a) the Feds have extra leeway because the dollar a global currency (something which shouldn't be taken for granted), not only because they can printb) states which can't print can have a perpetual deficit as long as it's smallc) a deficit that's too large for too long is trouble, even for the Fedsa) it also depends on the economic situation (oversimplifying: if the economy is is good shape, you don't want a large deficit increase)

I agree completely. Perhaps I should have omitted the words "need to." I was speaking from a legal standpoint, not what is good for the country.

I don't care to reveal any personal details, but it was a major research institution in the US, considered to be one of the top 25 universities in the US, and ranked even higher than that in Accounting/Business.

I'm not asking for your name or identity... just the professor's name.

Dear m0002a, my economics professor was a Nobel laureate. What he taught me contradicts much of what you say. You can go verify it if you want. If you tell me yours, I will tell you mine.

I don't want to cite to an unverifiable source... but if you don't tell me yours I can't in all good conscious tell you mine. Can I?

Dear m0002a, my economics professor was a Nobel laureate. What he taught me contradicts much of what you say. You can go verify it if you want. If you tell me yours, I will tell you mine.

I don't want to cite to an unverifiable source... but if you don't tell me yours I can't in all good conscious tell you mine. Can I?

1. I told you what he said on first day of class. How would you or your econimic professor know what he said in class that I took 25 years ago?2. I don't care whether you believe that he actually told the class that, or whether you even think what he said is true or not.3. I am not sure why an econimics professor would know more about the various provisions of the tax code than a professor of Taxation (who had a Phd in Accounting). But maybe I don't understand your point.

it appears you also need some education in syllogisms and logic, because your argument is non sequitur... I think you mean you're (or "you are"), not your... I don't believe that my opinion has a higher value than anyone else's.... Considering your lack of literacy as displayed in the post above, and your intolerance to allow those with other opinions to post, it is no wonder you had such a hard time finding a job.... I don't think my responses are any more contentious than yours, and usually much less so. I do try to make them well thought out and provide the best arguments that I can muster to support my views, but I don't see how that is threatening to anyone.... Do you have arthritis, or having some keyboard problems, or what?.... If there ever was a US President who was agnostic or atheist, I would put all my money on Obama... If there ever was a US President who was agnostic or atheist, I would put all my money on Obama... Your entire theory about American power, comparing it to the English, French, etc colonial power, is upside-down and back-ass-wards.... I would bet my life that they ("Dubya and Perry") are a lot more intelligent than you are.... The Third Reich was lead by many very intelligent and high educated men, who enjoyed the Opera at night, and committed genocide during their day job.... That is absurd. I did not compare anyone's beliefs to the Nazi's or Adolf Hitler.... as Socrates pointed out, rhetoric in general (and what the Sophists are skilled at) is the ability to make the poorer argument appear to be the better. ... Looks to me that Democrats are recruiting wackos to discredit the Republican "black man," ...I am sure that in your own mind, all the world’s problems can be blamed on Bush and the Republicans, but I don't think that analysis holds ups under scrutiny. You are not even remotely interested in the truth, only in political demagoguery and name calling, so civilized discussion of these issues is useless....

But your ( ) not so good at taking it (I am referring to "what the Sophists are skilled at")

1. I told you what he said on first day of class. How would you or your econimic professor know what he said in class that I took 25 years ago?2. I don't care whether you believe that he actually told the class that, or whether you even think what he said is true or not.3. I am not sure why an econimics professor would know more about the various provisions of the tax code than a professor of Taxation (who had a Phd in Accounting). But maybe I don't understand your point.

You know we are getting way out in the weeds here.

*************

How do we get to where we have good working government -- where the government is "of the people, by the people, and for the people"? Will any of the candidates for the presidency have a chance to do this with unlimited, anonymous money, and with corporation and lobbyists writing the laws? Will people who cannot have a stake in the government, and cannot see any way they can improve their lot -- even want to take part in such a government?

How do we get to where we have good working government -- where the government is "of the people, by the people, and for the people"? Will any of the candidates for the presidency have a chance to do this with unlimited, anonymous money, and with corporation and lobbyists writing the laws?

I'm not seeing how this will get fixed during our lives. Money has always had a seat at the table. It seems like money has a few too many and is not about to give any of the seats up.

As long as ignorant voters allow themselves to be swayed by expensive political campaigns, we will continue to get this. It's not the money that empowers these forces, it is the ignorant voters who are easily swayed and mislead to vote against their personal interests.

A better educational system might help, but even that is under attack on multiple fronts... including the GOP as embodied in the statements of the leading GOP candidates for President.

The problem isn't the politicians who are so easily bought. And they are so inexpensive. For a paltry few millions of dollars you can purchase your own tax loophole worth hundreds of millions or even billions of dollars.

No, the problem is with the people who vote for and support such politicians.

3. I am not sure why an econimics (sic ) professor would know more about the various provisions of the tax code than a professor of Taxation (who had a Phd in Accounting).

That you aren't sure.. well that is part of the problem. This was a Nobel prize economics professor speaking about economics in an economics class. What would make you think some community college hack with an accounting degree, teaching people how to file tax returns, understands more about economics?

You know what they say, if you are not part of the solution then you are part of the ____________?

That you aren't sure.. well that is part of the problem. This was a Nobel prize economics professor speaking about economics in an economics class. What would make you think some community college hack with an accounting degree, teaching people how to file tax returns, understands more about economics?

You didn't actually ever say (much less quote) what your economics prof said that you claim is contrary to what I said. I would bet my life that 95% of economics professors would agree that a substantial number of provisions in the US tax code are related to the government offering people incentives to act in certain ways which have nothing to do with calculating or taxing people on their true economic income. Even liberals claim (rightly so) that the tax code is full of loopholes for special interests that are not necessarily based on a fair calculation of taxable income.

Your claim about my professor (and by implication me as a student) as being in a community college is wrong, and contrary to what I told you, so I guess you calling me a liar.

ces wrote:

You know what they say, if you are not part of the solution then you are part of the ____________?

I would recommend a class on syllogisms and logic so that you don't post things completely out of left field (no pun intended).

Your claim about my professor (and by implication me as a student) as being in a community college is wrong, and contrary to what I told you, so I guess you calling me a liar.

Au contraire my old friend. I am highly confident you speak the truth as you recollect and understand it to be.

I do think you take yourself and your message far far too seriously. I think you need to lighten up. The world does not revolve around you... honest.

What exactly was it you said? I thought the authority on which you were relying, was an accounting Phd, teaching some kind of introductory accounting/taxation course. For the record, who was he, what course was he teaching and were did he teach it?

Man accused of sending threatening letters to Congress"Investigators said Christopher Lee Carlson was indicted on two criminal counts arising out of an investigation into the mailing of about 100 envelopes containing white powder." He was complaining about corporate money and lobbying, and objecting to corporate "personhood" http://www.usatoday.com/news/nation/sto ... 53449324/1

Au contraire my old friend. I am highly confident you speak the truth as you recollect and understand it to be.

I do think you take yourself and your message far far too seriously. I think you need to lighten up. The world does not revolve around you... honest.

What exactly was it you said? I thought the authority on which you were relying, was an accounting Phd, teaching some kind of introductory accounting/taxation course. For the record, who was he, what course was he teaching and were did he teach it?

When I repeated here what the tax professor told me, I never said I agreed with it 100% (although I think there is some kernel of truth in the statement). I doubt that even the tax professor actually thought it was 100% true, but it does make an interesting point about very complicated tax system filled with various incentives or disincentives in an attempt to get us to do things the government wants us to do. It also makes a point about our habit of deficit spending (even 25 years ago).

Neither did I say that all these "extra" incentives in the tax code are always a bad thing. For example, the government has a legitimate interest in getting people to save their money (so not tax IRA or 401K contributions), and invest it for the long term (so tax long-tern gains at a lower rate), rather than have everyone live paycheck to paycheck. There are all kind of tax credits for purchasing energy saving cars, appliances, power-generated equipment, etc. There is a gas guzzler tax when purchasing a car with very poor gas mileage (not part of income tax code, but a tax nonetheless). There are many other legitimate examples as well. There are also some examples that I (or you) may not agree with (apparently you don't like the fact that dividend income is only taxed at 15%, but my suspicion is that you are only against that because Mitt Romney has a lot of dividend income in recent years).

It doesn't matter who the professor was, he is retired or maybe dead now. I also have a suspicion that you are really trying to discover more about me (where I went to school and maybe where I live) and are not really interested in the professor. As I mentioned previously, I am not going to give you any personal information about myself.

I am not really interested in personal information about you, but it might be interesting to hear some actual intelligent argument when you disagree with me, instead of just "disagree", "no", or "nah". If you want to explain what your economics professor said, and why you think it contradicts what my professor of Tax said, that might be an interesting discussion instead of ad hominem attacks or dribble.

I already mentioned that I don't care about spelling. I am not sure whether mixing up your and you're is a grammatical error (or something else), and I would normally not even mention it except that it seems to keep happening over and over and over.

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